Money Matters

Is a No-Tipping Policy Right for You?

If tomorrow morning you posted a sign that said “no tips please,” what do you think would be the impact? No-tipping policies in salons, spas, and waxing studios are slowly but surely changing the way clients not only pay, but view their nail service professionals.

You’ve just completed a service and the client is fumbling with the bill. You can almost read her mind. “How much should I tip?” “Do I tip the owner?” “Will they think I am cheap if I only leave 10%?” This anxiety at checkout is the number-one reason cited for creating a no-tipping policy. Candice Everest, owner of Panache Nail Studio on Camano Island, Wash., eliminated this situation 13 months ago when since she implemented her no-tipping policy. Says Everest: “Most of my clients would gladly pay a little more for the service if they knew they could avoid this dilemma.” Clients are relieved and appreciative of the policy. “Many of my clients have shared, sometimes confi dentially, how much they appreciate knowing upfront what a service will cost,” she says.

Just do a simple web search on tipping etiquette and you will be overwhelmed by more than 2 million tips, suggestions, and postings. It’s a popular topic with little agreement about whom and how much to tip.

PROFESSIONAL VERSUS SERVICE PROVIDER

According to Wikipedia, a professional is “someone who has completed formal education and training in one or more professions. The term also describes the standards of education and training that prepare members of the profession with the particular knowledge and skills necessary to perform the role of that profession.” That certainly sounds like a licensed nail professional.

If you consider yourself a member of a professional occupation rather than a service worker, a no-tipping policy makes sense. A no-tipping policy can help educate clients about your training and promote the perception that you are a trained professional. Clients are generally willing to pay for professional services and promoting this aspect of your business helps you set yourself apart in a highly competitive industry. It may also support setting your nail service prices in line with other professionals.

Heather Archibald, general manager of Josephine’s Day Spa and Salon with two locations in the Houston area feels that in today’s social media- and review-driven world, a no-tipping policy is simply good business. “We build our business by recommendation — not by tips,” says Archibald. The power of positive reviews to drive new clients is another strong factor in supporting a no-tipping policy. Archibald adds, “What do you do when you are new to an area or looking for a new salon? Go to the review sites.” Josephine’s Day Spa and Salon promotes the idea that the best tip a happy client can offer is a favorable review and a personal recommendation.

THE PLAYING FIELD IS NOT LEVEL

Unlike restaurant and food service employees, salon owners do not benefit from tax credits when reporting employee tips. Under current law, tips must be reported and owners must pay Social Security, Medicare, and sometimes state taxes on employee tips. In addition owners often absorb the credit card processing fees on tips added to credit card payments, which can add another 2%-3%. The Professional Beauty Association (PBA) has initiated a campaign to support the passage of the Small Business Tax Equalization and Compliance Act, commonly referred to in the industry as the FICA Tip Tax Credit, to remedy this discrepancy. However, there is no assurance that the beauty industry will soon begin to enjoy the same benefi ts the restaurant industry has received since 1993.

NO-TIPPING POLICES ARE GROWING

Perhaps you have heard about Waxing the City — a Denver-based waxing business franchise with nine locations and plans for expansion. The website boldly proclaims that its no-tipping policy is not a joke. The rationale is that their cerologists are professionals first and foremost. Clients do not tip their doctors, dentists, or other professionals so why should waxing professionals expect a hefty tip? Waxing the City promotes referral and recommendation in lieu of a tip as a better way to acknowledge superior service.

Brenda Gilbert, owner of BG Makeovers, a day spa in Raymond, N.H., does not offer nail services. But her decisionto institute a no-tipping policy for her spa was inspired by her personal experience with her local nail salon. “I found myself holding off on getting my nails done or having a repair because of the expense. Often the extra tip amount on top of the service was more than I could justify,” says Gilbert. If this was happening to her, she realized that her clients must be feeling the same thing and postponing or cutting back on services. Gilbert addressed this by launching her “tip-free zone” at BG Makeovers. Gilbert reports that indeed clients are returning more frequently. She has also noticed an increase in referrals from appreciative clients who promote the no-tipping policy to friends and family.

In a no-tipping environment both the owner and the employee can calculate accurately what they can expect to collect in service revenue. This can be a powerful tool for planning and promotional efforts. Another benefi t is having accurate financial data for taxes or other audits. There is no confusion regarding what was paid out in terms of wages versus tips. The employee will no longer have to keep a daily tip record and calculate not only personal tips but tips gained from tip pools or tip sharing. Lessening or eliminating some of the paperwork burden for owners and employees while reducing a potential red fl ag for the IRS saves time, money, and worry.

CAREFUL CONSIDERATIONS

These tips can help you identify if a no-tipping policy can benefi t your business’s bottom line.

Calculate the amount of tips as a whole, and also for each employee.

Identify all related costs such as credit card fees and accounting.

Estimate the amount of additional hourly or commission split that would be required to replace tip income for each employee.

Calculate price increases needed to make up lost tip income and adjustments to wages.

Review client history both formally and informally using your salon software program. Ask yourself what is the average length of time between visits? Will a no-tipping policy impact this as well as attract new guests?

Poll your best clients on their feelings about tipping and no-tipping policies.

Discuss the potential impact with employees or contractors. Giving careful consideration to the benefi ts of a no tipping policy may bring your business a boost and create happy clients who choose to not only refer new clients but return more frequently.

Patti Biro is the owner and founder of Patti Biro and Associates (www.pattibiro.com), a consulting firm specializing in planning and providing innovative continuing education in the spa and wellness industry.